Price Rigidity. Evidence from the French CPI Macro-Data

L. Baudry, Hervé LE BIHAN (), Patrick SEVESTRE and S. Tarrieu

Documents de Travail from Banque de France

Abstract: Based upon a large fraction of the price records used for computing the French CPI, we document consumer price rigidity in France. We first provide a methodological discussion of issues involved in estimating average price duration with micro-data. The average duration of prices in the sectors covered by the database (65% of CPI) is then found to be around 8 months. A strong heterogeneity across sectors both in the average duration of prices and in the pattern of price setting is reported. There is no clear evidence of downward nominal rigidity, since price cuts are almost as frequent as price rises. Moreover, the average size of a change in price is quite large in both cases. Overall, while our results do not entail a clear conclusion about the existence of menu costs, there is evidence of both time-dependent and state-dependent price setting behaviors by retailers.

Keywords: Price stickiness; Duration of prices; Consumer price index; Frequency of price change (search for similar items in EconPapers)
JEL-codes: E31 D43 L11 (search for similar items in EconPapers)
Date: 2004
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Related works:
Working Paper: Price rigidity. Evidence from the French CPI micro-data (2004)
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Persistent link: http://EconPapers.repec.org/RePEc:bfr:banfra:113

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